They say desperate times call for desperate measures. If so, auto giant General Motors (NYSE: GM) must indeed be in dire straits.
Considering that its credit rating is now at junk status, that its continued bet on gas-guzzling SUVs has been ill-timed, and that foreign car manufacturers are grabbing market share, it's easy to conclude that these are not halcyon days for the world's largest auto manufacturer. In response, the No. 1 car maker has unveiled an unprecedented incentive plan to jolt it out of its funk: It will offer employee discounts to everyone, regardless of whether you work for the company, a move that can save car buyers as much as $8,000 depending on the model.
It's a daring plan, to say the least.
May was a tough month for virtually all car manufacturers. Here's what total car and truck year-over-year sales growth -- contraction, really -- looked like at most of the major companies:
| Manufacturer Sales |
|
|
General Motors
|
(4.7%) |
|
Ford (NYSE: F) |
(10.5%) |
|
DaimlerChrysler (NYSE: DCX) |
(3.0%) |
|
Toyota (NYSE: TM) |
7.8% |
|
Honda (NYSE: HMC) |
(7.6%) |
|
Nissan (Nasdaq: NSANY) |
16.6% |
|
Volkswagen
|
(34.0%) |
|
BMW
|
(3.1%) |
With General Motors losing $1 billion in the first quarter, the unveiling of an incentive plan to attract buyers to its car lots could be a shrewd move. At a time when Asian car makers are grabbing market share, a maneuver like this by GM could stem the loss.
Overall, European car makers saw sales decline 14% but saw their market share decline as well, dropping to 6.1% from 6.5%. That contrasts with the Asian car manufacturers who saw their market share increase to 36.3% from 34.8%. As GM's market share fell to 25.1%, the company has had plenty of incentive to make this employee discount offer.
American manufacturers had previously been easing up on incentives to move their cars. According to Autodata, GM's incentives had fallen to about $4,000 a car, down 7.3% from last year, while Ford and DaimlerChrysler both reduced their incentives by about 6.5% per vehicle, to approximately $3,700. In contrast, Toyota, Honda, and Nissan increased their incentives by about 12.5%, though that averages to a much lower $1,568 per vehicle.
GM's new employee-discount program includes all vehicles, except the 2005 Corvette and medium-duty pickup trucks, and runs from June 1 to July 5. But the discount might trigger a longer-term problem: Being able to profitably sell an auto for as much as $8,000 less will undoubtedly alert the buying public to just how much of a markup GM's cars carry. It might boost sales for the month but result in a large drop-off afterwards.
Whether this is desperation or cold calculation, if you're in the market for a car or truck this month, you could save a wad of cash with a GM vehicle. What that means for the car maker's future sales, though, is anyone's guess.
Drive on over to these related Foolish articles:
BMW is a selection of the Motley Fool Stock Advisor
service
.
Fool contributor Rich Duprey owns shares of Ford. He does not own any of the other stocks mentioned in the article. The Fool has a disclosure policy.
Terms & Conditions
RSS Headlines
Fool UK